social protection

When the Bank did its first social assistance public expenditure review in Indonesia in 2012, the diagnosis was clear. Despite spending significant amount of resources in “welfare”, most of them were through expensive subsidies (fuel, electricity, rice) that were not necessarily benefiting the most vulnerable segments of the society. General subsidies represented 20 percent of total national budget, but household targeted social assistance programs were already making their way, increasing from 0.3 to 0.5 percent of GDP between 2004 and 2010. Still, there was an overall dissatisfaction on what had been achieved, with the Gini coefficient rose by about 6 percentage points in the period of 2005 to 2012.

With more than 27 million people still considered poor and as one of the countries in the East Asia and the Pacific region that has one of the highest income inequality levels, the coverage expansion and social assistance system strengthening is a must. Fortunately, the situation in the social assistance sector has changed dramatically.

In the last three decades, East Asia has reaped the demographic dividend. An abundant and growing labor force powered almost one-third of the region’s per capita income growth from the 1960s to the 1990s, making it the world’s growth engine.

Now, East Asia is facing the challenges posed by another demographic trend: rapid aging. A new World Bank report finds that East Asia and Pacific is aging faster – and on a larger scale – than any other region in history.

More than 211 million people ages 65 and over live in East Asia and Pacific, accounting for 36 percent of the global population in that age group. By 2040, East Asia’s older population will more than double, to 479 million, and the working-age population will shrink by 10 percent to 15 percent in countries such as Korea, China, and Thailand.

Across the region, as the working-age population declines and the pace of aging accelerates, policy makers are concerned with the potential impact of aging on economic growth and rising demand for public spending on health, pension and long-term care systems.

As the region ages rapidly, how do governments, employers and households ensure that hard-working people live healthy and productive lives in old age? How do societies in East Asia and Pacific promote productive aging and become more inclusive?

Mongolia’s current economic situation is characterized by a combination of falling commodity prices and slowing growth. This heightens the need for the country’s social welfare system to protect the poor and the vulnerable from the threatened fall in incomes.

To assess how well the system is performing, it is necessary to consider Mongolia’s spending on social welfare - whether it is directed towards poor and vulnerable households, and if the benefits provide effective and adequate protection.

Social protection specialists, disaster risk managers, risk finance practitioners and climate change experts at the World Bank Group sat down together recently to discuss the role of social protection systems in addressing the human side of disaster and climate risks.

Together with government counterparts and donor partners, they extracted lessons and came out with a compelling message: countries can respond to natural disasters better and assist victims faster if robust social protection systems are in place.